Correlation Between Rheinmetall and Eve Holding
Can any of the company-specific risk be diversified away by investing in both Rheinmetall and Eve Holding at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Rheinmetall and Eve Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rheinmetall AG and Eve Holding, you can compare the effects of market volatilities on Rheinmetall and Eve Holding and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Rheinmetall with a short position of Eve Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rheinmetall and Eve Holding.
Diversification Opportunities for Rheinmetall and Eve Holding
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rheinmetall and Eve is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Rheinmetall AG and Eve Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eve Holding and Rheinmetall is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Rheinmetall AG are associated (or correlated) with Eve Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eve Holding has no effect on the direction of Rheinmetall i.e., Rheinmetall and Eve Holding go up and down completely randomly.
Pair Corralation between Rheinmetall and Eve Holding
Assuming the 90 days horizon Rheinmetall is expected to generate 4.72 times less return on investment than Eve Holding. But when comparing it to its historical volatility, Rheinmetall AG is 1.67 times less risky than Eve Holding. It trades about 0.13 of its potential returns per unit of risk. Eve Holding is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 307.00 in Eve Holding on September 12, 2024 and sell it today you would earn a total of 145.00 from holding Eve Holding or generate 47.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Rheinmetall AG vs. Eve Holding
Performance |
| Timeline |
| Rheinmetall AG |
| Eve Holding |
Rheinmetall and Eve Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rheinmetall and Eve Holding
The main advantage of trading using opposite Rheinmetall and Eve Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rheinmetall position performs unexpectedly, Eve Holding can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Eve Holding will offset losses from the drop in Eve Holding's long position.| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
| Eve Holding vs. Heico | Eve Holding vs. Mercury Systems | Eve Holding vs. AeroVironment | Eve Holding vs. Howmet Aerospace |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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